The Cardano (ADA) price is hovering near an important support level as the strong sell-off pauses. The coin is trading at about $1, which is 65% below its all-time high. As a result, its market capitalization has dropped to over $34 billion, making it the 6th biggest coin in the world.
ADA price has lagged
Cardano is one of the most popular cryptocurrencies in the world. It was started by Charles Hoskinson, who is also a co-founder of Ethereum. He is also a leading advocate for blockchain technology.
Cardano was started in 2016 with the goal of being a better version of Ethereum. Besides, Ethereum is known for its many challenges. For example, it is a proof-of-work platform that is also significantly slow. Also, it is energy inefficient, and projects built in its network have substantially higher transaction costs.
Therefore, Cardano’s goal was to solve these challenges by creating a peer-reviewed platform based on the proof-of-stake technology.
In 2021, the Cardano price jumped to an all-time high of $3, pushing its market capitalization to over $90 billion. The jump happened ahead of the Alonzo hard fork, which introduced the concept of smart contracts.
Shortly thereafter, the Cardano price started a major decline that saw investors lose almost $60 billion in value.
Why Cardano price has struggled
There are a few main reasons why the Cardano price has underperformed its peer coins like Binance Coin and Solana.
First, the ADA price declined because of the slow adoption of the platform after the Alonzo hard fork. While several applications have been launched on Cardano, the scale remains substantially smaller than other chains. For example, it is estimated that the total value locked (TVL) in Cardano is less than $100 million. In contrast, the TVL in Ethereum’s DEFI platform is at $120 billion.
Second, the Cardano price has struggled because of the slower pace of development compared to other chains. For example, the platform launched its smart contracts feature in 2021, 6 years after its launch. In contrast, some networks like Binance Smart Chain and Fantom were started recently with smart contract features. Therefore, investors are concerned about the network’s adoption by developers.
Third, the ADA price has lagged because of the rising competition in the industry. This competition is coming from layer one networks like Solana and Avalanche and layer two platforms like Polygon and Immutable X. In the past few months, we have seen the number of developers building on these platforms jump. For example, Terra has overtaken Binance to become the second-biggest DeFi protocol in the world.
Therefore, there are concerns about whether Cardano will be able to compete with these networks in the future. Besides, most of them, like NEAR and Solana, have all features that developers want. They have a faster transaction process time and lower costs.
Ethereum is the elephant in the room. While its network is inefficient, it remains the go-to platform among developers. Indeed, its DEFI TVL is more than that of all other chains combined. With ETH 2.0 process in high gear, developers will likely opt for Ethereum instead of platforms like Cardano.
Finally, like all cryptocurrencies, the Cardano price has declined because of risk-aversion as the Federal Reserve hints about more rate hikes this year. Analysts expect that the bank will hike interest rates about four times this year. As a result, the US dollar has risen while a bond sell-off has pushed yields to the highest level in over two years. Risky assets like Cardano and tech stocks have all declined.
Cardano price prediction
The daily chart shows that the Cardano price has been in a deep sell-off lately. The coin is trading at $1, where it struggled to move below in 2021. The coin has moved below the 25-day moving average while the Relative Strength has dropped to about 40. Therefore, the coin will likely continue falling as bears target the next key resistance at $0.50.